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On June 25, 2014, the U.S. Department of Health and Human Services’ Office of Inspector General (“OIG”) released a Special Fraud Alert addressing two increasingly common relationships between clinical laboratories
and physicians that may raise fraud and abuse concerns—payments to referring physicians for (i) specimen
collection and (ii) data submission/review for laboratory registries.1
This Special Fraud Alert is likely a response to the increasingly competitive nature of the clinical laboratory
industry as a result of downward pressure on reimbursement, new health reform delivery structures and the
influx of small esoteric laboratories offering limited, specialized test menus. In this environment the OIG is
concerned that some laboratories may be taking steps to win business from referring physicians in potential
violation of the Federal Anti-Kickback Statute.
Payment for Specimen Processing
The Special Fraud Alert first addresses arrangements where laboratories, either directly or indirectly though
marketing or other agents, pay physicians to collect, process and package patient specimens. Often this may
involve expensive or specialized tests that require centrifuging or special storage/packaging efforts to ensure the
integrity of the sample during transport.
The OIG’s chief concern with such arrangements is one of double payment— if the physician already receives a
payment for such services from a third party like Medicare, through receipt of either a direct specimen collection
fee or a bundled payment for the service, intent to violate the Federal Anti-Kickback Statute may be found. This
is so even if the laboratory’s payment to the physician, standing alone, reflects fair market value. Other suspect
factors include:
• Payments that exceed fair market value for services actually rendered;
• Payments conditioned on a physician ordering a specified volume or type of test/panel, especially if tests are
duplicative or not reasonable and necessary;
1 OIG, Special Fraud Alert: Laboratory Payments to Referring Physicians (June 25, 2014), available at
http://oig.hhs.gov/fraud/docs/alertsandbulletins/2014/OIG_SFA_Laboratory_Payments_06252014.pdf.
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• Payments made on a per-specimen basis when more than one specimen is collected during a single patient
encounter, or on a per-test, per-patient, or other basis that takes into account the volume or value of
referrals;
• Payments made directly to the ordering physician, rather than the physician’s group practice, which more
likely bears the processing costs; and
• Payments made to the physician or group practice when the services are actually performed by a
phlebotomist placed in the physician’s office by a third party.
Registry Arrangements
The Special Fraud Alert next addresses payments by laboratories to physicians for the submission of patient data
or for answering questions or reviewing registry reports. Laboratories, especially those performing specialized
and expensive tests such as genetic and genomic tests, are increasingly establishing, coordinating and
maintaining databases, directly or indirectly, to collect data on the demographics, presentation, diagnosis,
treatment, outcomes or other attributes of patients who have or will undergo a particular test offered by the
laboratory. These registries can serve legitimate purposes related to clinical research, treatment or management
of chronic or genetic diseases, quality assessment or reimbursement analysis. Nonetheless, in the OIG’s view,
even registries established under the oversight of an independent Institutional Review Board will not protect
payments to physicians if one purpose of the arrangement is to induce or reward referrals.
According to the OIG, such payments may induce physicians to order medically unnecessary or duplicative tests,
or to order a test from the registry laboratory rather than “other, potentially clinically superior” laboratories.
Suspect characteristics of such arrangements include:
• Compensation arrangements that require a physician to perform tests with a stated frequency, that do not
require appropriate documentation of the physician’s services, that do not reflect fair market value or that
pay on a per-patient or other basis that reflects the value or volume of referrals;
• Laboratories collecting comparative data (and billing) for tests that may be duplicative or are not reasonable
and necessary;
• Laboratories limiting compensation only to tests for which the laboratory holds a patent or performs
exclusively, or collecting data only for the tests it performs (when the same test is performed by multiple
laboratories);
• Laboratories presenting registry-eligible tests on the requisition form in a manner that makes it more
difficult for the ordering physician to make an independent medical necessity decision with regard to each
individual test for which the laboratory will bill (e.g., disease-related panels); and
• Laboratories limiting data collection from (and thus paying) only a subset of physicians who are selected
based on their prior or anticipated referral volume rather than relevant attributes (like physician specialty).
“Carving-out” FHCP Business May Not Reduce Risk
Notably, the OIG emphasizes that Anti-Kickback risk exists even if such specimen collection or data registry
payments “carve out” Medicare, Medicaid and other Federal Health Care Program (“FHCP”) beneficiaries
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primarily because physicians typically limit the number of laboratories to which they refer for administrative
and convenience reasons. Accordingly, compensation for specimen collection or data registry services for non-
FHCP patients is viewed by the OIG as “disguised” remuneration for FHCP business, raising Anti-Kickback risk
under the OIG’s “swapping” theory (explained in numerous past OIG Advisory Opinions).
If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work or
Barbara Cammarata
Counsel
bcammarata@sidley.com
+1.202.736.8785
Meenakshi Datta
Partner
mdatta@sidley.com
+1.312.853.7169
Richard D. Raskin
Partner
rraskin@sidley.com
+1.312.853.2170
Scott D. Stein
Partner
sstein@sidley.com
+1.312.853.7520
Sidley Healthcare Practice
Our Healthcare Practice represents participants in all facets of the healthcare industry, including pharmaceutical, biotech and
device companies, DME suppliers, hospitals, skilled nursing facilities, physician-owned companies, professional associations and
research institutions. Our lawyers combine a strong background in the complexities of healthcare financing and delivery, including
coding, reimbursement, and coverage issues, privacy and security, trade regulation, and competition. We have extensive
experience representing clients on enforcement and regulatory matters before federal and state enforcement agencies.
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